Revolutionising cross-border payments to boost intra-Africa trade

IN a groundbreaking move to reshape Africa's financial landscape, the Pan-African Payment and Settlement System (PAPSS) has emerged as a centralised Financial Market Infrastructure that facilitates secure and efficient cross-border transactions across African borders. Working in collaboration with Africa's central banks, PAPSS provides a robust payment and settlement service connecting commercial banks and licensed payment service providers across the region as “Participants.” Since its announcement at the Twelfth Extraordinary Summit of the African Union in 2019, PAPSS has been hailed as a key instrument for implementing the African Continental Free Trade Agreement (AfCFTA), paving the way for enhanced intra-African trade and financial integration.

Afreximbank, in partnership with the African Union (AU), played a pivotal role in developing PAPSS, which aims to minimise risk and streamline crossborder transactions, significantly reducing the dependency on hard currencies. This revolutionary Financial Market Infrastructure is set to boost Africa's economic growth and underpin the implementation of the AfCFTA, serving as a continent-wide platform for processing, clearing, and settling intra-African trade and commerce payments through a multilateral net settlement system.

With its operational roll-out announced by African Export-Import Bank (Afreximbank) and AfCFTA Secretariat, PAPSS is set to be a game-changer for the African continent. By saving over US$5 billion in payment transaction costs annually, the platform will foster financial inclusion and facilitate seamless cross-border payments in local currencies, bolstering intra-African trade and reinforcing economic development.

Professor Benedict Oramah, President of Afreximbank and Chairman of the PAPSS Management Board, expressed his pride in realising the long-envisioned dream of implementing PAPSS. "With the implementation of PAPSS, Africa can expect to begin to reap the fruits of the African Continental Free Trade Agreement. Afreximbank is proud to have contributed to the realization of this multi-decade dream," he said.

He emphasised that PAPSS collaborates with existing regional and national payment systems, complementing them to better integrate African economies for the collective benefit.

Wamkele Mene, Secretary-General of the African Continental Free Trade Area, lauded the establishment of PAPSS as a pivotal development in facilitating affordable and efficient cross-border trade transactions, a crucial aspect of AfCFTA's implementation. With greater capacity for conducting cross-border transactions, Africa can now unlock numerous opportunities for enhanced intra-African trade. He said: "The introduction of PAPSS provides Africa with greater capacity to conduct cross-border transactions and expand the scale of both active and latent opportunities for enhanced intra-African trade."

PAPSS CEO, Mike Ogbalu III, envisions PAPSS as a fundamental rail connecting African markets, enabling seamless trade for individuals, businesses, and governments across the continent. "PAPSS will provide fresh impetus for businesses to scale more easily across Africa, essentially eliminating the borders that have balkanised us and robbed us of our economic prosperity for so long," he added.

Following the successful pilot phase in the West African Monetary Zone (WAMZ), PAPSS is now advancing discussions with other national and regional institutions to expand its continent-wide connectivity. Afreximbank, as the main Settlement Agent, provides settlement guarantees on the payment system and overdraft facilities to all settlement agents, further accelerating expansion and ensuring settlement finality.

To further support the clearing and settlement in WAMZ countries, Afreximbank has already approved $500 million, with an additional $3 billion estimated to bolster the continent-wide implementation of PAPSS.

In a remarkable step forward, PAPSS has signed Memorandums of Understanding (MOUs) with five African multinational commercial banking groups: Access Bank Group, Ecobank Group, KCB Group, Standard Bank Group, and UBA Group. This collaboration seeks to revolutionise cross-border transactions across Africa, leveraging the extensive networks of subsidiaries and representative offices across major economic centres.

By integrating PAPSS into their existing systems, these commercial banks aim to enhance efficiency, transparency, and reliability in intra-African settlement, driving financial inclusion and continental economic development.

The joint efforts of PAPSS, Afreximbank, African central banks, and participating commercial banking groups are setting the stage for a more integrated and efficient African banking landscape. With PAPSS poised to unleash its potential continent-wide, Africa stands on the cusp of a new era of financial prosperity and boundless cross-border opportunities. Customers of the partnering banks will soon experience the benefits of PAPSS, as the service becomes available in their countries towards year-end.